Monday, February 27, 2006

Telecom disappears up own backside, scores injured

I believe it was the great Sammy Davis, Jr., who once said, "Ouch, babe, I really mean it."

Today the FTSE100 closed near a five-year high, and our beloved Pan-European telecom sector fell off a cliff - down 1.34%. That's something like EUR7bn in capitalization sucked down the crapper of history. The chief culprit, Vodafone, announced an impairment review, adjusting the carrying values of assets bought back at the bubbliest part of the Bubble, none of which is particularly surprising. What has people spooked, rightly, is that all the previous assumptions upon which the company has been justifying these valuations, have deteriorated to the point where there was no more hiding. And we ain't even talking 3G yet.

For an industry already suffering a very protracted self-esteem collapse, the really depressing thing for the sector in today's development is stated in my first sentence: "Today the FTSE100 closed near a five-year high, and our beloved Pan-European telecom sector fell off a cliff - down 1.34%." As the largest EuroTelco by a significant margin, and also a major constituent of the FTSE100 index, it speaks volumes about the state of the sector that Vodafone can fall nearly 3% and still not hold the broader market back. EuroTelco can't even cause trouble anymore...